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Saturday, March 19, 2011

Think Like a Publisher!

Dean Wesley Smith has many excellent posts about a number of issues dealing with writing, ebooks and publishing. This one caught my eye and thought I'd pass it along. You can read the full article here: Think Like a Publisher

To really act like a publisher, you need to understand what you are trying to gain. You need to know how many sales will get your expenses back. And you need to know at how many sales will you start making a profit.

So this chapter is about why you need to try to determine set income ranges, and how to do that at this moment in 2011. Remember, this discussion is about acting like a real publisher, not a hobby writer. Real publishers are in the business to make a profit. That’s the focus now, so please keep that in mind. If that is not your intent, fine.

Pricing

To determine any kind of income and sales potential, you must first make some pricing decisions. And you must decide as a publisher what your long-range goals are.

The values we set for WMG Publishing and the values I will be using for this discussion on setting income are as follows:

Electronic Publication

Short story: 99 cents.

(Gross Income Expected: 35 to 60 cents per sale domestic. Use 35 cents for calculations.)

Short Novels, Short Collections: $2.99.

(Gross Income Expected: $1.94 to $2.o9 per sale domestic. Use $2.00 for calculations.)

Regular Novels (over 35,000 words), Long collections: $4.99

(Gross Income Expected: $3.24 to $3.49 per sale domestic. Use $3.25 for calculations.)

In the above calculations, Gross Income is after the fees and costs taken out by the bookstores and providers of electronic sales.

POD Publication.

Gross Profits on both are in the range of $3.00 to $4.00 per sale. Use $3.25 for calculations.

Why Pick These Prices?

These electronic prices are under traditional publishing ranges, yet not too far under to seem to be a discounted price. And the novel price is under the $5.00 impulse buy mark. Trade paperback prices are normal traditional publication prices for trade paperbacks in the size range indicated.

Also, keep some basic math in mind. If your motives are profit, you must sell ten books at 99 cents to make the same amount that you would make when you sell one book at $4.99. And since no traditional publishers do 99 cent novel pricing except rarely as a short-term promotion, a 99 cent price for a novel will label you as a discount or hobby publisher. WMG Publishing motives are very profit based.

Calculating A Project’s Projected Income

Now comes the fun part. Hang onto your math brains. And let me stress again that not even traditional publishers know this number for a fact. If they did, publishing would be a very simple business without risk.

In traditional publishing, publishers have some tools to use in this area. For example, they can look at a book and then (like shopping in real estate) they compare to other books of the same length in the same genre with the same basic author recognition. So if a similar book sold 20,000 copies, then it is pretty safe to use that sales number in the current books calculation.

They also use an author’s track record. If the author’s last book sold 50,000 copies, then it is pretty safe to do a profit-and-loss calculation with that as the sales range. (And that projection then sets the author’s advance.)

But as an indie publisher, with no real track record yet, (and a world that is expanding into electronic publishing faster than most people can keep up with) how is it possible to make any real projections of sales?

Bottom line: It’s not.

All Actual Costs plus Time Costs plus Overhead Costsdivided by Gross Income Per Book equals NUMBER OF SOLD BOOKS NEEDED TO BREAK EVEN.

The best way to show this is to just run through a calculation. Math brains ready? Here we go…

Example:

Novel

Total Cost Publishing Costs: $350.00. (Four hours of time at $50.00 per hour plus $100.00 cover cost plus $50.00 overhead for those four hours. Time includes electronic and POD layout time and launch time. For the moment exclude my writing time on the novel. We’ll bring that in later. And remember, the $50.00-per-hour is my calculation from an earlier chapter. Do your own.)

I get $3.25 gross profit for both POD and electronic sales. So I divide $350.00 by $3.25 to get the number of copies that need to sell to break even on all production costs.

Bottom line: I need to sell 108 copies to make $50.00 an hour for my production time, $50.00 for overhead, and replay my cover costs. (If you are only concerned about first repaying the $100 out-of-pocket cover cost, you would need to sell 31 copies to recover that using these numbers and pricing.)

Now add in my time for writing and the overhead for that time.

Again, I use $50.00 per hour, and it takes me under 60 hours to write a 60,000 word novel. So I feel I should get at minimum $3,000.00 for my writing time on that book and my overhead costs for my office. (Side Note: It has been a long time since I took only a $3,000 advance on a novel and sure wouldn’t do it in traditional publishing now.)

Total Expense $3,350.00 divided by $3.25 gross income per sale equals 1,030 copies that need to be sold at $4.99 cover price.

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